C214 OA Quick Review

Income Statement - Answer- Shows all revenues received and all expenses incurred over a specific period of time (NI = Revenue - Expenses) Statement of Retained Earnings - Answer- (RE = Beginning RI + NI - Dividends) Over a specific period of time. Balance Sheet - Answer- One of the three main financial statements. It is a snapshot of the firm's assets, liabilities, and equity at any point in time. Balance Sheet Equation - Answer- (Assets = Liabilities + Owner's Equity) (Equity = Assets - Liabilities) Net PPE - Answer- Gross PPE - Accumulated Depreciation Statement of Cash Flows - Answer- Shows the change in the cash balance for a period of time. Details: Cash flow from Operating Activities (CFO) Cash flow from Investments (CFI) Cash flow from Financing (CFF) Cash Flow from Operations (CFO) - Answer- CFO = NI +Depr Exp -(Δ in Operational Assets) +(Δ in Operational Liabilities) (OL does not include Notes Payable) Cash Flow from Investments (CFI) - Answer- CFI = Δ in PPE + Depr Exp Cash Flow from Financing (CFF) - Answer- CFF= (Δ in Comm Stock) +(Δ in Long-term Liab) -Dividends Equity Valuation - Answer- 1) GGM 2) CAPM Gordon Growth Model (GGM) - Answer- Assumes annual growth rate of dividend is constant; Stock value equals the dividend divided by the difference of the required return and the dividen